Medicare Advantage Premiums: Important Things You Need to Know

Premiums is another word for payments. And your Medicare Advantage premiums are the monthly payments you make for your health insurance plan. By learning how premium payments work, you can better decide if getting Medicare Advantage insurance is right you, and if so, which type of plan you can afford.

How Medicare Advantage Premiums Work

Medicare Advantage, known as Medicare Part C, includes both Medicare Parts A and B (Original Medicare) coverage. When you enroll in a Medicare Advantage plan, you continue to pay premiums for your Part B (medical insurance) benefits. Medicare decides the Part B premium rate. The standard Part B premium for 2016 is $121.80, but can be higher depending on your income. For persons who receive Social Security benefits, many still pay the 2015 premium rate of $104.90.

You usually also pay a separate monthly premium for having the Part C plan. But not all Part C plans have monthly premiums. In addition to covering medically necessary procedures, Part C plans typically provide prescription drug coverage (Medicare Part D) and other types of benefits like dental and vision. So the premium you may pay is used to cover the wider range of services available with Part C.

Only private insurance companies that are approved by Medicare can provide Part C coverage. Insurance companies decide what services the plan will cover, so monthly premiums vary from plan to plan (and state to state). Insurance companies are only allowed to make changes to the premium rate once a year.

Making Premium Payments

Your Part B Medicare premiums are billed directly through Medicare while your Part C premiums are billed through the private insurance company. There is a little bit of a difference with how you pay Medicare and your private insurance company.

Premium Payments to Medicare: if you receive Social Security, Office of Personnel Management, or Railroad Retirement Board benefits, Medicare will automatically deduct your Part B premiums from your benefits check. If you don’t receive these benefits, you will receive a bill called ‘Notice of Medicare Premium Payment Due’. You can then pay by mailing a check, use your bank’s online billing to make payments every month, or sign-up for Medicare’s bill pay to have the premium come out of your bank account automatically.

Premium Payments to Private Insurance Companies: if your insurance company charges a premium for your Part C plan, you can set it up for your payments to come out of your Social Security benefits. This is not automatic. You must submit a request to Social Security, and they have to approve your request before your Part C payments will be deducted. If you don’t get Social Security, you can also pay from your bank account or mail a check.

Tips on How to Pay Medicare Premiums

Make sure to pay both your Part B and Part C premiums on time so you won’t lose coverage—automatic deductions are the best option to avoid missing a payment

Make sure both Medicare and your Part C provider has your current mailing address to send your bill (especially if your premium is not automatically deducted from Social Security)

Don’t miss more than 3 months of Medicare Part B payments—premiums are due the 25th of every month and coverage will end in the 4th month if past due payments are not made

Contact your Part C provider if you think you will miss a payment—private insurance companies have their own rules on plan cancellation for nonpayment

Medicare Part C Cost: How Much is the Premium?

Medicare Advantage premiums vary depending on the type of plan and the state you live in. Monthly premiums range from $0 to the high $300s. But overall, average monthly premiums are usually lower than what you would pay for Medicare Part B*. According to an article from PR Newswire, the average premium across all plan types for 2016 is $64.92 per month.

Weighted vs Unweighted Premiums

When it comes to only comparing plans that include Part D benefits, known as MA-PD plans, the Kaiser Family Foundation reported that the average premium for MA-PD plans that are unweighted by enrollment is $53 a month for 2016, while the average premium for plans weighted by enrollment is $41 per month for 2016. That means that most people are selecting the more affordable plans on an overall basis.

The Kaiser Family Foundation also provided the average monthly premiums as of 2016 for some of the different types of plans according to those unweighted and weighted by enrollment.

Plan Type

Average Monthly Premium Unweighted by Enrollment

Average Monthly Premium Weighted by Enrollment

Medicare Advantage HMO (Health Maintenance Organization)

$39

$31

Medicare Advantage Regional PPO (Preferred Provider Organization)

$75

$34

Medicare Advantage Local PPO

$79

$68

Medicare Advantage PFFS (Private-Fee-For-Service)

$91

$58

How Can My Medicare Part C Plan Have a $0 Premium?

Medicare Advantage plans with $0 premiums are not uncommon. In fact, $0 plans have increased by six percent since 2015, according to PR Newswire. So there are now more of these plans available in 2016. You may be wondering, “how can an insurance company have $0 premiums?” That’s a great question. And it’s actually easy to explain. This is how the process works:

Medicare approves a private insurance company to provide members with Original Medicare

The insurance company becomes responsible for paying members’ claims

Medicare pays the insurance company a flat fee for the cost of paying claims

The insurance company uses this payment to provide members with healthcare coverage

The insurance company usually saves more money through contracts with healthcare providers (hospitals, doctors’ offices, etc.)

The insurance company passes on these savings to members, which results in a $0 premium

It’s important to remember that although you may pay $0 in premiums for Medicare Advantage, this doesn’t mean that the plan is free. You still have to pay your Part B premium, annual deductible, copayments, and coinsurance for your Part C plan.

Medicare Advantage MSA: A Special Type of $0 Premium Plan

Another type of Medicare Advantage plan that’s available is the Medical Savings Account (MSA) plan. This plan is different from other types because it’s designed to not include Medicare Advantage premiums at all. This $0 premium is not because the insurance company is passing on savings to plan members. As with all Medicare Advantage plans, you still pay your Part B premiums when you enroll in a MSA plan.

The trade off with not having a monthly premium is that MSA plans have a high deductible. The deductible is the amount of Medicare-covered services you have to pay for out-of-pocket before the plan starts paying for covered services. The money that goes into your MSA by the plan can be used to pay your deductible and other healthcare costs.

How Does Obamacare Affect Medicare Advantage Costs?

Obamacare (Affordable Care Act) made several changes to Medicare Advantage plans. Most of these changes had to do with the health insurance industry in general, including previsions for free preventive care. Obamacare has even started closing the Medicare donut hole.

But one of the major changes specific to Part C plans is that insurers are not allowed to charge plan members more than what Original Medicare would charge for certain services, such as chemotherapy. This would affect costs like your copay and/or coinsurance. It is not reported that Obamacare made any changes to how private insurers can determine premium rates.

Can I Get Help Paying for Medicare Advantage?

You can get help with paying for your Medicare Part C plan through Medicare Savings Programs (MSPs) made available by the Centers for Medicare and Medicaid Services (CMS). If you meet the requirements for low-income, disability, or certain chronic health conditions, MSPs can help pay for some of your plan costs, which may include premiums. Many people who have limited incomes and/or disabling illnesses are enrolled in a Medicare Advantage Special Needs Plan.

Paying for a Medicare Advantage Special Needs Plan

Along with having a qualifying medical condition, persons must have both Medicare Parts A and B to be eligible for a Special Needs Plan (SNP). Some persons who meet these requirements also have Medicaid. For those who have both Medicare and Medicaid, Medicaid helps pay for most of the costs in joining a plan. These costs include premiums, coinsurance, and copayments.

CMS requires that Medicaid pay for copayments and coinsurance for certain people enrolled in MSPs. However, it is not required that Medicaid has to help with paying Medicare premiums for Part C insurance. Federal Medicaid laws allow each Medicaid state agency to decide if they will pay Part C premiums for those enrolled in a MSP as a qualified Medicare beneficiary.

An insurance company can also decide to charge a premium for Part C SNP enrollees who have both Medicare and Medicaid as well as those who don’t have both. In this case, you would pay the full Part C premium (if there is one). According to Medicare.gov, SNPs typically have the same basic costs as other Part C plans. This means you could pay around the same average monthly premiums as shown in the table above or maybe even $0 in premiums.

How Do I Choose a Medicare Advantage Plan?

The first step in choosing a Medicare Advantage plan is to compare quotes from different insurance companies. HealthMarkets provides access to Medicare Part C plans from leading insurance companies. You can get a quote for plans available in your area from various providers through a licensed agent. You can even add prescription drugs to compare Medicare Advantage premiums for plans that include Part D coverage.

It’s easy to get started with finding a Part C plan to fit your budget. To speak with one of our agents about enrolling in a plan, call us 24/7 at (800) 488-7621 to get a free quote over the phone. Or, meet with an agent in person near you to get more hands-on assistance. Whichever way you choose to connect with us, we’re here to help you get the right Medicare Advantage plan with a premium you can afford.

*Although Medicare Advantage plan premiums are lower than Medicare Part B premiums on average, this doesn’t mean that the overall costs for Medicare Advantage plans are cheaper than Original Medicare. Other costs in Part C plans include copayments, coinsurance, and deductibles. Part C plans usually have a higher upfront cost than Original Medicare.

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Sources:
Kaiser Family Foundation (2013). Average Single Premium per Enrolled Employee For Employer-Based Health Insurance. | HealthMarkets. Telephone survey to assess the satisfaction of customers and prospects in a survey population of 5745 participants. April 9-15 of 2014.